The Medium Gets The Message; TV's Monoliths Have Learned The Web Is a Fragmented World

If there were any established companies ready-made for the Internet, they should have been the big television networks. Or at least that was how it seemed two years ago.

''We have what is needed to compete because of the great depth in our brands and the great consumer loyalty to them,'' Michael D. Eisner, chairman of Walt Disney, said in 1998 on the eve of the debut of Disney's Go Network.

The broadcast networks, after all, are still the most powerful media forces in America, accounting for the two-thirds of the seven hours of television the average household watches each day. And they have an arsenal of advantages: lots of money, libraries of programming and decades of experience in attracting and keeping big audiences. And most important, the networks have the ability to promote their Web sites with unlimited amounts of advertising on television, which is still the most persuasive medium.

But after great effort and hundreds of millions of dollars of promotion, the networks are still also-rans on the Web. Traffic to their various sites badly lags behind the big portals like Yahoo, America Online and Microsoft's MSN, which are the closest thing the Web has to major networks.

Certainly Wall Street has all but written off the broadcast companies as Internet players. The publicly traded shares of NBC Internet and ABC's online cousin, the Walt Disney Internet Group, are down more than two-thirds this year -- a steeper decline than those which the stocks of their larger competitors have suffered.

And last week, NBC Internet, citing slowing ad sales, said it would lay off 20 percent of its work force.

CBS, meanwhile, has delayed plans to spin off its Internet operations into a separate company. And CBS's new parent, Viacom, has postponed the offering of shares in its online music business, the MTVi Group.

''Right now investors are not rewarding the Internet activities of Disney, NBC and Viacom,'' said Tom Wolzien, an analyst with Sanford C. Bernstein. ''They are small, and the market prefers the big players like Yahoo and America Online.''

It has been a humbling comedown for the networks and their owners, who are more accustomed to being mighty media monoliths than niche players scrounging for audiences.

Mr. Eisner now says he was given bad advice about how much the Internet differed from Disney's other businesses. The company developed the first version of its portal, Go.com, in six months, he noted, to keep pace with the notion of hyperfast Internet time.

''People told me we had to be like Microsoft and put out version one and two and three, and eventually we would get it right,'' Mr. Eisner said. ''We did that with Go, then people told us it wasn't as good as Yahoo or America Online. I've never been involved with anything where I didn't believe what we did wasn't the best. But here we were, experimenting in front of the public.''

What went wrong?

To begin with, the networks overestimated their own strengths. Their vaunted promotional abilities, for example, were helpful in persuading people to try their Web sites. But lacking the depth and sophistication of features that the successful portals had, many of the network sites could not turn the merely curious into steady customers.

And for all their early confidence, the network companies have been uncertain whether to make their Internet operations independent, to emulate the fast-moving style of other Web companies, or to keep them part of their broadcast operations, to take best advantage of their popular media content and packaging skill.

''The mistake made over and over again by traditional media companies is that they dabble in new media rather than doing something strategic to integrate with their core assets,'' said Tom Rogers, chief executive of Primedia and former head of NBC's cable operation and much of its Internet activities.

As it turns out, the networks' biggest Web successes have been the efforts most closely aligned with broadcast programming -- as when ABC and its cable cousin ESPN promote the sports content of ESPN.com, or when CBS newscasts cite the financial reports on CBS MarketWatch.com. But those successes in specialized areas of coverage stand in stark contrast to the typically more disappointing results whenever the network companies have tried to reach broader audiences.

And even one unqualified hit is giving little glory to an outfit that could use some. MSNBC.com, backed by the combined promotion of NBC's cable network and Microsoft's MSN Internet site, has grown rapidly to become the No. 1 news site on the Internet. MSNBC even was profitable for NBC last year, executives say. But according to the terms of the deal, MSNBC's audience counts toward MSN's ratings, and the site sends little traffic to NBCi. The networks' experience is not simply a tale of hubris, of media moguls glibly assuming they would show those goateed and pierced Web kids a thing or two.

In large measure, it was Wall Street that pushed the networks into the game, by demanding two years ago that the network companies mount a credible Internet strategy. So, all too gamely, the networks plunged ahead.

Disney, the owner of ABC, and NBC, with the blessing of its corporate parent, General Electric, each made a series of acquisitions, combined with internal operations, to build Internet portals that were meant to challenge Yahoo and America Online. For ABC-Disney it was the Go Network, built from the Infoseek search engine. For NBC, it was Snap, bought from Cnet.

But the best days of both Go and Snap seem to be behind them. It is true that Go was the Web's sixth-most-popular site in June, according to the research firm Media Metrix. And Snap, counted along with the other sites run by the NBC Internet unit, ranked ninth. But on the Internet, both audience and revenue appear to be concentrating in a handful of leaders at the very top. Indeed, over the last year, Go and NBCi have actually lost audience share, even as the leaders -- America Online, Yahoo and MSN -- have all increased their shares by more than 10 points.

CBS, meanwhile, has taken a different tack. Rather than trying to create a network-scale portal, the company backed a dozen independent, specialized Web services, like MarketWatch, Sportsline and Iwon.

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''The networks looked at the Internet and had to do something, if for no other reason than defensively,'' said Dean Daniels, a former CBS executive who is now president of Theglobe.com, a youth-oriented online community site. ''There are huge audiences online that are spending less time watching television. The problem is that none of the networks are getting it right.''

Time Warner, which runs the CNN, Turner and WB networks along with myriad other media properties, felt so flummoxed by the rise of new media that it agreed to sell itself to America Online in January.

And the News Corporation, which owns the Fox network and endured an expensive Internet flop in 1997, has kept a lower profile since then. Fox now hopes to capitalize on the rollout of high-speed, or broadband, Internet connections that are much better suited to disseminating video signals than are conventional telephone lines. One example of this strategy, already available, is toohotforfox.com, a site that offers video outtakes from the Fox network's so-called reality programming.

''The game is over, and the major media companies didn't win it,'' said Peter Chernin, the News Corporation's president. ''We didn't win. Disney didn't win. AOL and Yahoo did. So we're going to the next game, which is broadband, and that's wide open.''

Meanwhile, the three big broadcast networks are reassessing their strategies. NBCi, which recently said ad sales would fall short of Wall Street's expectations, now plans to scrap the the heavily promoted Snap name and more than a dozen other brands and focus on a redesigned site under the name NBCi.com. And Disney, recognizing the futility of going portal-to-portal with either Yahoo or AOL and learning from the success of its own ESPN.com, plans to focus its Web effort on entertainment and leisure activities.

ESPN.com is the top sports site, followed by CBS Sportsline, both of which are incessantly promoted on their networks' sportscasts.

''We are focused on the marriage of the Internet and on-air,'' said Fred Reynolds, Viacom's chief financial officer, who held the same position at CBS, where he looked after the Internet activities.

Indeed, CBS's Web strategy may be the one that is likely to change the least. All along, the company tended to buy partial stakes in specialized Internet sites like Sportsline in return for broadcast advertising time rather than cash. And much of that advertising comes not from the network's inventory of 30 second commercials, but within the programming itself. ''Every time Dan Rather introduces the business news from MarketWatch, we get credit,'' Mr. Reynolds said.

There are also early signs that the networks are figuring out how to create Web sites tied to their broadcast entertainment programming. Traffic is brisk at the sites for CBS's hit shows ''Survivor'' (www.cbs.com/network/tvshows/ mini/survivor/index.shtml) and ''Big Brother,'' (http://webcenter.bigbrother2000.aol.com/entertainment/NON/) the latter featuring video feeds of contestants 24 hours a day.

And ABC has developed Web programming meant for viewers to browse while watching certain programs. Some 150,000 people compete during each ''Who Wants to Be a Millionaire'' broadcast, for example, to see if they can answer the questions before the contestant does. Not only does that site earn a profit from the Internet ads it sells, but ABC believes it also helps build a loyal TV audience.

In essence, it appears that the networks are concluding that their best bets for the Web may spring from individual programs, rather than their entire programming portfolio. Ah, the virtues of hindsight.

What has been much harder has been to figure out the digital incarnation of the networks themselves. CBS, NBC and ABC are some of the most powerful brands in the country, but what exactly do they stand for with ''.com'' affixed to the end?

A major television network is, after all, an aggregation of many types of programming -- news sports, comedy, drama and, these days, voyeurism. So it seemed natural that the corollary of the network in the digital age was the Internet portal -- a one-stop shop full of entertainment and information, bundled with a search engine and lots of other useful features like news and e-mail. Portals were doubly appealing because, then as now, they get the lion's share of the traffic and advertising revenue on the Internet.

But once they waded in, the networks soon found themselves up to their knees in a swamp of tedious portal necessities like building business directories and creating retail transaction services that have little to do with the media companies' expertise.

''I learned I don't want to sell insurance or create a yellow pages,'' Mr. Eisner said. After a year of struggling to beat Yahoo at its own game, Mr. Eisner decided earlier this year to pull back from the portal business. ''It's not us. Our company stands for travel and entertainment and having a good time,'' he said.

NBC, by contrast, is still focused on building a broad portal. But the emphasis will be on shopping.

''You can't be all things to all people, and that was NBCi's problem,'' said Marty Yudkovitz, president of NBC Interactive Media

Notably, the only network-affiliated portal that is growing rapidly is Viacom-CBS's Iwon.com, which has no explicit links to the CBS network. In less than a year that site, which promises users the chance to win as much as $10 million, has grown to a monthly audience of 8.4 million people, according to Media Metrix.

Now CBS is considering buying or building a broader portal to present a unified view of its 200 local stations and its affiliated Internet sites. But Mr. Reynolds said the company would not give up its strict financial discipline that kept it from entering the sort of deals its rivals did.

''We will not be a second citizen online,'' he said. ''We are willing to invest a lot of money, but at the end of the day you have to have a business that produces more cash than you spend.''